As 2016 draws near, which way is your company heading?
Monday, September 21, 2015
The best business owners know the time to be thinking about the future of your company is now. Business may be booming today, but it's important to be considering the next steps you'll take in continuing to ensure success for you and your employees.
As an employer, it's good to stop and take stock of what really matters: How will you keep your business moving forward in a positive direction in the next 12 months?
When faced with this question, business owners usually explore three options:
- new strategies they can implement in their company
- new innovations they can design in their market or within their current portfolio
- disruptions they can create in their own or new markets to win new market share
Understanding these three tactics, what they could mean for your company and how to get started in your own journey is the first step toward planning your company's future.
If you're thinking about changing your business strategy, it typically involves analyzing your current business practices and determining where and when adjustments are required. For example, you might want to try selling your products in a brick-and-mortar store when you've traditionally been doing e-commerce, or you may decide to change your pricing model from annual to monthly subscriptions for new customers.
Exploring new strategies within your business today takes some background work. You'll want to look at revenue, sales and other key performance indicators in recent years to see where improvements could be made, or where small adjustments could have an impact. Knowing this information will help you decide when and where to implement new strategies into your business.
Amazon is a great example of a company that, using this tactic, has become one of the most strategic players in the tech industry and in business overall. Amazon is the giant it is today by systematically taking down a critical piece (retail) of many existing industries.
It strategically took the process of buying material "things" — books, clothes, food, etc. — and made it user-friendly and simple to purchase them online. Venkatesh Rao, a contributor to Forbes, says that when the definitive book on corporate strategy for the early Internet era is written, Amazon will be the main example.
If this is the route you choose to take for your business as you head into 2016, it's important to remember that changing up your business strategy can involve risks, so plan ahead and examine the alternatives for change before taking any action to actually modify your company's strategic plan. You'll want to introduce new changes slowly, and always be prepared to return to your previous strategies if your new strategies don't pan out for your business.
Innovation is different from strategy in that it refers to the evolution of business attributes, functions, outcomes or other discernible differentiating characteristics. The late Marshall McLuhan, University of Toronto professor and cultural guru, suggested a functional definition for innovation that is easily recognizable by anyone in any type of organization. Marshall says innovation either enhances something, eliminates something, returns us to something in our past, or reverses into its opposite over time.
When thinking about innovation, it's hard not to think of Google, and more specifically their core search business. Google was a late entrant into the field, coming to market after other sites like Yahoo Directory or AltaVista made online search possible.
However, Google lapped the field of search engines with its approach. Google innovated searching online by ranking pages according to citation notation, in which a mention of one site on a different website became a vote in that site's favor. Incremental changes to its algorithm over time have kept Google at the forefront of search engines.
Google continues to innovate today with its recent announcement of Alphabet, a new parent company under which Google will operate. The parent company will also house Google's other projects like Calico, which is focused on life and longevity, and Life Science, which works on the glucose-sensing contact lens.
"We've long believed that over time companies tend to get comfortable doing the same thing, just making incremental changes," Larry Page, CEO of Google, said in the company's blog announcement. "But in the technology industry, where revolutionary ideas drive the next big growth areas, you need to be a bit uncomfortable in order to stay relevant."
There's no one right way to get started with innovation at your company. However, Clayton Christensen, professor of business administration at the Harvard Business School and author of "The Innovator's Dilemma," says successful businesses are trained to focus on what he calls "sustaining innovations" — innovations at the profitable, high end of the market, making things incrementally bigger, more powerful and more efficient.
If this is the route you choose to take for your business as you head into 2016, it's important to remember that innovation is deliberate and takes work. It likely won't come naturally if someone you think is innovative hasn't stepped forward in your business, or if you haven't stumbled upon an innovative idea yet in your own career.
Jeanne Liedtka, a contributor to Forbes, discusses this in her article, "How to Innovate — Without a Miracle." She suggests that if you want to innovate in your company and you're looking for a place to start, you first must focus on discovery — uncovering the deep unmet needs of your target stakeholder group.
Disruption can be seen as a form of innovation, but they are not one in the same. Disruption occurs when established companies, acting rationally and carefully to stay on top, leave themselves vulnerable to upstarts who find ways to do things more cheaply, often with a new technology. Businesses that exist today are either disrupting or being disrupted.
According to Christensen, the "innovator's dilemma" is the difficult choice an established company faces when it has to choose between holding onto an existing market by doing the same thing a bit better (innovation or strategy) or capturing new markets by embracing new technologies and adopting new business models (disruption). Disruptive innovations usually find their first customers at the bottom of the market. As unproven, often-unpolished products, they cannot command a high price.
But think about the way Craigslist has disrupted classified advertising. You no longer have to wait until the next day to see what new jobs are out there for you. Going to Craigslist's site gives you real-time, up-to-date open positions that are posted around the clock. Now, people can apply for jobs faster and on their own schedule.
One way to decide whether disruption is the path for you is to decide who your disruption is for. Someone who knows about disruption is Joel Holland, founder and CEO of VideoBlocks, a company that shook up the stock footage industry when it introduced a Netflix-like subscription model that gives amateur and professional filmmakers unlimited access to video clips and digital effects for $99 per year.
"When we were looking to disrupt the industry, we weren't just trying to find a way to save our customers more money because that could be at the expense of contributors. Nor were we just trying to find a way to make more money as a company," Holland says. "We were trying to find a way to basically benefit all three groups: the customers, the suppliers and the company."
As you plan for 2016, you'll likely take one of these three routes to improve your business. Before starting down one path, note that each of these tactics takes resources that you'll need to either hire outside or use resources from within your company to put time and effort toward the ideas on the table.
You'll have to ask yourself this: Based on my current business, my market landscape and what I can afford emotionally, physically and monetarily, which tactic will I pursue?
No matter which way you decide to go, just make sure you are moving forward and not staying the same, as companies who do stay the same eventually go out of business. Clayton cites industries and products like steel, disk drives and transistor radios as examples of companies that were disrupted and therefore became obsolete because they chose to incrementally make things better as opposed to acting on the big ideas or hunches that precede disruption.
Moving forward means staying ahead of yourself and your competition to create businesses that keep up with market trends and demand.
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